The change of rules for property valuation has severely affected the real estate sector in the country since July 1. All the activities in the property business have come to a grinding halt and prices of real estate have started falling in major cities, including Lahore and Karachi. In his budget speech, the finance minister had announced that the valuers appointed by the State Bank of Pakistan would determine the fair market prices of immovable property. Earlier, it was the prerogative of the deputy commissioners to categorize and fix the valuation of properties in every district. The real estate sector picked up the pace after years of recession as various investors entered the market and introduced brand names. This changed the whole chemistry of the business and with improvement of the income people attracted towards the branded housing colonies in major cities. However, the government in a bid to enhance its revenue opted to tax luxury houses and their owners.
If documentation of the economy is necessary component of the market economy, un documentation is blessing in disguise. Not all the individuals living in posh localities are corrupt but most of them are self-made and chose to buy or build luxury houses with their hard earned money through a business. At least 40 industries are involved in construction industry which is the integral part of the real estate sector. Curbs on the investment and witch-hunting of the owners of the luxury houses on one pretext or the other will land the whole business in trouble. The potential investors have the options to look for foreign lands for investment where their money is safe and life is more secure than at home. The real estate agents have pinned all their hopes on the finance minister for relief and it is yet to be seen how things will work in the absence of standard operating procedure.
The only panacea to the situation is that the federal government should continue to accept the value of land fixed by the provincial governments and a mechanism should be evolved to revise the prices of properties which deemed lower than their actual worth. The federal government should also take into account the legal aspects of its orders and should not fringe upon the stakes of provincial autonomy. As a result of the government steps, many deals have been cancelled and prospects of future deals are also bleak. Therefore, sooner the government reverses its decision the better. The federal government should only concentrate on attracting foreign investment in the real estate business if it really wants to enhance its revenue collections.
